We have previously reported that specific endogenously produced small molecule oxysterols, formed in vivo as intermediaries of cholesterol metabolism, have potent osteogenic effects on multipotent mesenchymal stem cells (MSC) in vitro. We have shown that these effects are mediated through activation of the Hedgehog (Hh) signaling pathway, independent of Hh proteins. In addition, we have demonstrated that these oxysterols induce bone formation in neonatal mouse calvaria organ cultures, and bone healing in both a rat calvarial critical-sized defect model and a rat spinal fusion model in vivo. Thus, these oxysterols could potentially replace currently used expensive recombinant bone morphogenetic proteins (BMPs) and autogenous bone grafts for stimulation of local bone formation in non-healing fractures and critical bone defects. In addition, we have shown that when used in combination with BMPs, osteogenic oxysterols greatly reduce the concentration of BMPs required to induce effective osteogenesis in vitro. Accordingly, we have recently performed oxysterol structure activity relationship (SAR) studies that have resulted in the synthesis of a novel family of potent oxysterol analogues that possess osteogenic and anti-adipogenic activity equal or superior to the parent oxysterols. However, in addition to activating the Hh pathway, osteogenic oxysterols also activate liver X receptor (LXR) signaling whose role in osteogenesis is unclear and may promote oxysterol-induced osteogenesis by regulating targets of Notch signaling. Therefore, we hypothesize that osteogenic oxysterol analogues activate Hh and LXR signaling in osteoprogenitor cells and that both signaling pathways play an important role in osteogenic responses to oxysterols. To examine this hypothesis, we will pursue the following specific aims: 1) Elucidate the molecular signaling profile of osteogenic oxysterol analogues to determine the role and relative activation levels of Hh and LXR signaling in oxysterol-induced osteogenesis in vitro; 2) Examine the osteogenic activity of oxysterols and their mechanism of action in vivo for local administration using the rat spinal fusion and femoral defect models, while defining the optimal scaffold for local delivery and elucidating the role of Hh signaling in oxysterol effects in vivo; and 3) Examine the role of baseline and oxysterol-induced Hh pathway activity in BMP2-induced osteogenesis by determining whether Hh signaling through Gli transcription factors mediates the synergy between oxysterols and BMPs in stimulating osteogenesis in vitro and in vivo, and whether oxysterols may potentially improve the quality of the newly formed bone by inhibiting BMP2 stimulation of adipogenesis. These studies will provide important new information regarding the basic mechanisms regulating osteogenesis and the effects of oxysterols, as well as guidance for future investigations of oxysterols as a potential new class of osteoinductive agents for localized and perhaps systemic osteoregeneration.